During a March 17, 2021 panel of the American Bar Association/Institute for Professionals in Taxation virtual seminar on income tax, Chris wondered about the timing of the work group starting a few months after the 2018 South Dakota v. Wayfair Inc. decision.
Chris acknowledged there is some language in the majority opinion of Wayfair regarding the idea that having a market and virtual contact in a state are business activities and noted that “business activity” is not defined in P.L. 86-272, but he said what makes him uncomfortable is that P.L. 86-272 presupposes nexus.
He said Wayfair is a dormant commerce clause case about what states may do so as not to burden interstate commerce when Congress has failed to say something and that he isn’t sure that dormant commerce clause jurisprudence should even play a factor once Congress has stepped in and created limits, like in the case of P.L. 86-272.
Regarding one of the examples addressed by the proposed revisions setting out that a business contracting with in-state customers to stream videos and music is not a protected activity because
it’s not the sale of tangible personal property, Chris wondered if the state sales tax characterization of the product as tangible personal property matters from the MTC’s perspective.
Chris said that without federal authority defining “business activity” for purposes of P.L. 86-272, it seems fundamentally unfair for a state to characterize digital goods as tangible personal property for purposes of sales tax, and then have its interpretation of P.L. 86-272 be that digital goods are not tangible for purposes of the protection.